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City of Atlantic City v. Laezza

Decided: June 12, 1979.


On certification to the Superior Court, Chancery Division.

For reversal -- Justices Mountain, Pashman, Clifford and Schreiber and Judge Halpern. For affirmance -- None. The opinion of the court was delivered by Pashman, J.


As in New Jersey State Policemen's Benevolent Ass'n, Local 29 v. Town of Irvington, 80 N.J. 271 (1979) (Irvington PBA), decided this day, we are here called upon to determine whether the costs incurred by a municipality in funding particular arbitral awards must be taken into account when determining whether the municipality's total budgetary appropriations have exceeded the fiscal limits imposed by the Local Government Cap Law, N.J.S.A. 40A:4-45.1 et seq. We must also delineate the procedural steps that should be followed by municipal officials seeking to challenge interpretations of the Cap Law rendered by the Director of the Division of Local Finance or the Local Finance Board.

On April 15, 1978, the Board of Commissioners of plaintiff City of Atlantic City adopted its budget for fiscal year 1978. Reflected in the final appropriations figure were anticipated costs totalling $17,912,441.76 for the funding of municipal employee wages and salaries -- an amount which represented approximately a $200,000 increase over the sum allocated to payroll costs in 1977. As adopted, the budget's final line of appropriations did not exceed by more than 5% the City's overall 1977 expenditures and hence was in keeping with the fiscal constraints imposed upon the municipality by the Local Government Cap Law, N.J.S.A. 40A:4-45.1 et seq. See N.J.S.A. 40A:4-45.2; Irvington PBA, supra, 80 N.J. at 281-282.

At the time of the budget's adoption, the City had not yet concluded negotiations with four unions as to the terms of 1978 collective agreement for various segments of its work force. These unions -- Local 198, International Association of Fire Fighters (IAFF); Local 24, New Jersey State Policemen's Benevolent Association (PBA); Local 2303,

American Federation of State, County and Municipal Employees (AFSCME); and Local 331, International Brotherhood of Teamsters (Teamsters) -- were, respectively, the majority representatives of the City's firefighting, police, blue collar and white collar employees.

By the time the budget had been approved by defendant John Laezza, Director of the Division of Local Finance, see N.J.S.A. 40A:4-10; 40A:4-79, each of the four contract disputes had been submitted to binding interest arbitration. Arbitration of the City's negotiation impasses with the IAFF and PBA was mandated by the compulsory arbitration provisions of the Employer-Employee Relations Act, N.J.S.A. 34:13A-14 et seq. See Irvington PBA, supra, 80 N.J. at 285-287. The Teamsters and AFSCME disputes were voluntarily submitted to binding arbitration by agreement of the parties, see N.J.S.A. 34:13A-7. See Irvington PBA, supra, 80 N.J. at 284.

Arbitral decisions in the IAFF, PBA, AFSCME and Teamsters proceedings were issued, respectively, on May 29, July 6, July 10, and August 16, 1978. According to City officials, implementation of these awards would cause the 1978 budget to exceed by $1,702,114.34 the maximum final appropriations figure allowable under the Cap Law, see N.J.S.A. 40A:4-45.2. These officials also concluded that were expenditures reduced in other areas in order that the overall budget remain within the Cap Law's 5% ceiling, the City's residents would suffer extreme hardship.

The municipality at first sought to cope with this fiscal dilemma by adopting an ordinance authorizing an "emergency" appropriation. See N.J.S.A. 40A:4-46 et seq.; Irvington PBA, supra, 80 N.J. at 298. Since this appropriation, when aggregated with previous 1978 emergency expenditures, exceeded 3% of the overall 1978 budget, its implementation required the approval of the Director of the Division of Local Finance. See N.J.S.A. 40A:4-49.

On October 17, 1978, the Director notified the City that this approval would not be forthcoming. The municipality

therefore requested a hearing before the Local Finance Board in order to challenge the Director's determination. See N.J.S.A. 52:27BB-15. On October 23, representatives of both the municipality and its resident-taxpayers appeared before the Board and expressed conflicting views as to the necessity of an emergency appropriation. At the close of the day's proceedings, the Board concluded that it could not definitively resolve the dispute without a scrutiny of various documents relating to the City's fiscal condition. It therefore adjourned the matter until November 8, 1978, at which time City officials were ordered to produce the required data.

According to Atlantic City's Accountant and Comptroller, the City could not "afford" to wait until November 8 for approval of its emergency ordinance. Absent immediate ability to expend the monies there appropriated, "a massive termination of over one-half (1/2) of the City's work force would be mandated." The City therefore abandoned its appeal before the Board, and on October 23 the City, PBA, IAFF and Teamsters filed the present suit in Superior Court against both the Director and the Board. Plaintiffs sought a declaratory judgment that the costs to be incurred in implementing the four arbitration awards constituted "[e]xpenditures mandated after the effective date of [the Cap Law] pursuant to State * * * law," N.J.S.A. 40A:4-45.3(g), and hence need not be considered by the municipality when determining whether its 1978 overall budgetary appropriations exceeded Cap Law limitations. Plaintiffs also requested an injunction restraining defendants from interfering with the City's efforts to appropriate sufficient funds to defray these costs.

Three days later, on October 26, the trial judge rendered his decision. He ruled that the costs to be incurred in funding the arbitral awards were indeed expenditures that should be excluded from the municipality's Cap Law calculations. He did not, however, issue an injunction, as he was of the view that defendants lacked "jurisdiction" to interfere with the City's funding of the awards even should they

desire to do so. Finally, although none of the parties had so requested, he confirmed each of the four arbitral decisions Formal judgment embodying the trial judge's rulings was entered on November 13, 1978.

One week later, defendants filed a notice of appeal to the Appellate Division. While the matter was pending unheard before the appellate judges, we ...

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